ZTE boards smartwatch bandwagon as phone market slips

It sounds like a corny advertising gimmick: The smartwatch. An idea whose time has come.

But that's the thinking that prevails at ZTE Corp. The Shenzhen-based telecommunications gear maker, which has become a major player in the growing global smartphone industry, intends to unveil a smartwatch early in 2014, according to the Wall Street Journal. ZTE's smartwatch will strongly resemble Samsung Electronics Co's Galaxy Gear and other brands already out there, but target consumers who advocate a more frugal lifestyle, the newspaper reported.

As ZTE handset marketing strategy head Lu Qianhao put it: "We are focusing on the mainstream market," according to the Journal.

Smartwatches typically sell for $150 to $350. ZTE's plan to sell an affordable smartwatch first for the Chinese market in the second quarter of next year and possibly the US and Europe at some future date takes its cue from the company's smartphone pricing strategy. ZTE's Source smartphone retails for about $220 and its Overture model for $150.

The company's smartwatch is designed to work only with ZTE smartphones, but could be modified after early adopters - who often have large social media followings that generate influential consumer feedback - try it out. One idea under consideration is releasing other smartwatches that will work with Android smartphones from any brands, according to the Journal. ZTE is also mulling other possibilities in wearable computing, such as smart glasses and smartphone-connected shoes for healthcare purposes, the newspaper said.

Besides Samsung, the companies that have jumped on the smartwatch bandwagon in the past year include Qualcomm Inc, which plans to launch its Toq smartwatch Dec 2. Apple Inc, maker of the iPhone, is reportedly developing an iWatch for mass production in the second quarter of 2014, Digitimes reported.

ZTE isn't the first Chinese company with a smartwatch. In late September, Chinese smartphone maker Coolpad released the waterproof cWatch, according to Engadget. To some, it was inevitable that Chinese companies would bring out cheaper versions of the smartwatch, after Samsung generated considerable media buzz earlier in September with the release of its Galaxy Gear smartwatch.

But that doesn't explain why ZTE - a creative and opportunistic outfit that embraced phones after a US Congressional report pummeled its telecom gear business as a national security risk last year - is getting into the smartwatch market now. The fact is, the company's smartphone market share in China is eroding. China, the world's largest smartphone market after overtaking the US last year, is cluttered with many domestic rivals peddling cheaply priced handsets.

In the third quarter, ZTE, the seventh-largest smartphone vendor by shipments in China, saw its year-over-year share of the market decline to 5 percent from 10 percent, according to research firm Canalys. The dominant smartphone maker was Samsung with a 21 percent share. Trailing it, with 13 percent of the market, was Lenovo Group Ltd, followed by Coolpad with 11 percent.

Canalys analyst Nicole Peng said that in the Chinese smartphone market, ZTE lacks an "obvious competitive advantage". Its brand recognition among consumers is not as strong as other Chinese competitors such as Lenovo, Peng told the Journal. Globally, ZTE's smartphone market share was sliced in half to 5 percent in the third quarter, from 10 percent a year earlier, according to Canalys.

With its smartwatch move, ZTE is engaging with a robust marketplace. Canalys predicted in July that smartwatch shipments worldwide in 2014 would exceed 5 million units, a whopping tenfold increase from 500,000 units expected in 2013. Canalys bases its outlook on the assumption that by the end of 2014, Apple, Google Inc and Microsoft Corp. will all have launched smartwatches, further crowding a marketplace already scoped out by Samsung, Sony Corp. and Pebble Technology Corp.

Despite these impressive numbers, the smartwatch market pales in comparison to the smartphone field. Research firm IDC expects worldwide smartphone shipments this year to surpass 1 billion, up 40 percent from 2012.